Highway spending records criticized

Auditor: Insufficient trail on $24.1 million

By John Cheves

JCHEVES@HERALD-LEADER.COM

The state Transportation Cabinet can't prove that $24.1 million in federal highway planning and construction funds was correctly spent because it didn't keep the necessary records, State Auditor Crit Luallen said Monday.

The auditor also criticized the cabinet for not keeping sufficient documents on payments from its highway safety program, and for letting an acquisition agent in its Division of Right of Way sell land to the cabinet in Edmonson County for a road project she was working on, creating an appearance of impropriety. The agent's case was referred to the cabinet's inspector general for further review, Luallen said.

The auditor's report was her second this year examining how federal funds are spent by state agencies.

For fiscal year 2007, the Transportation Cabinet was unable to show auditors how $24.1 million in federal highway funds was used or to provide a complete list of the local governments that received the money, Luallen said. That leaves taxpayers in the dark, she added.

"We just don't know," she said. "Because of inadequate documentation, we can't confirm that it was adequately spent."

The Federal Highway Administration will review the problem and decide whether Kentucky must repay the questioned funds, she said.

"This money is in jeopardy," Luallen said.

Cabinet spokesman Chuck Wolfe referred most questions Monday to his agency's formal response to the audit report.

In that response, the cabinet said it has experienced "a great deal of employee turnover" in its Division of Accounts and needs to train new people to keep records. In the future, a database will track the names and other information on local governments that get funding, it said.

However, it said money was not spent improperly. And it said that invoices were reviewed before payments were made, even if the records were not immediately available for auditors.

The money "did not disappear into the void," Wolfe said.

Also in her audit report, Luallen said the state Department of Military Affairs must require local governments to obtain program audits if they get more than $500,000 in federal grants. Of a sample of 20 such federal grant applicants at the department, six were not asked to certify that they were required to have an audit, she said.

This proved to be a problem during a recent audit of the Leslie County Fiscal Court, where the county failed to provide documents detailing how it spent nearly $2.1 million in disaster relief from 2004 to 2007, Luallen said.

In Estill County, auditors found that a local official improperly used $9,952 in federal grant money to purchase retirement credits, and they said the county must reimburse that money to the Department of Military Affairs.

In its formal response, the department said it would improve its compliance requirements for local governments. However, the department noted that it has lost or expects to lose shortly a number of employees in key accountability positions, and it might have a difficult time hiring replacements in view of the tight state budget.